GST compliance ratings will be the public rankings of all the registered taxpayers and the evaluation that can impact it in numerous ways

The introduction of the Goods and Services tax has brought a radical change in the taxation system of the country. It is a comprehensive tax regime which subsumes the various indirect taxes of the country including, but not limited to, Service Tax, Excise Duty and Central Sales Tax. Breaking the shackles of stereotypes, the government of India established an online portal for the compliance of this law in an attempt to foster transparency in the entire process by means of compliance ratings. The GST compliance ratings will be the public rankings of all the registered taxpayers and the evaluation would be done on the basis of how well they are able to comply with the regulations set forth in the new indirect tax regime.

Talking about the section which takes care of GST compliance ratings, section 149 of the Central Goods and Services Tax Act, 2017 is the one which is concerned with the subject. It clearly states that each registered entity will be duly assigned a GST compliance score on the behalf of the government. The score would be computed on the basis of their documented proof of complying with the provisions of the GST Act. As the rating system is completely new and holds no prior roots, everyone would begin at the same level. However, if a taxpayer fails to comply with the rules, the ratings are bound to go down.

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Why a higher GST compliance rating so desirable?
Although it must be evident till now, but the question of the desirability of a high GST compliance is quite obvious to ask. The rating will incorporate all the details of the taxpayer including the name & GST identification number and all these particulars will be visible on the public domain of the GST network. This means that all businesses will have the motivation to manage their compliances in an efficacious manner as doing so wouldn’t just help them in maintaining a favourable image but would also reduce their taxation burden to a significant extent.

There is no denial to the fact that the GST compliance rating of a business can impact it in numerous ways and some of these are mentioned below.

*     A significant hike in business opportunities:
Everyone wants to work with a company which is extremely compliant when it comes to adhering to laws and regulations. As the potential business partners will have the access to the ratings of a fellow taxpayer, a low score might not create one of the finest impressions. In the worst case scenario, it might lead to a loss of a possible business opportunity and even the existing professional relations may turn sour. Having a positive score isn’t just symbolic of the fact that the business is excessively compliant, but it also hints towards the fact that the entity is highly professional and honours the regulations which are set in front of it.

*     Chances of audit and scrutiny:
It doesn’t come as a surprise that the taxpayers who hold a low GST compliance rating will be more likely to get under the lens of scrutiny and audit. While a higher ranking will be evident of the fact that the rules set by the authorities are being followed, the non-compliance clearly indicates that the taxpayer isn’t adhering to the regulations of the government. In the most adverse situation, the companies which have an extremely low rating will get under scrutiny and an audit will be done in an attempt to seek answers for their inability to comply with the rules which are set forth by the Council.

*     Administrative treatment:
This is a fact known to all that the government provides refunds and other assistances on a merit basis. A good GST compliance rating means that the taxpayer follows the rules and as a result, getting an edge over others in the GSTN ecosystem is a viable expectation. It is most likely that the highly compliant businesses will be getting faster assistance in comparison to others.

Though there isn’t any surety at the moment, but there are speculations that the GST Council will incorporate new parameters on the basis of which the taxpayers will get evaluated. The main aim behind the very existence of such a rating system is to instil a feeling of tax compliance in the taxpayers while helping them transition into the new tax regime in a seamless manner.